So Bank of America plans to lay off the equivalent of a small town.  The announcement ends their calendar year on such a high note.  This year was busy for the only remaining powerhouse bank in the south with the purchase of Countrywide and Merrill Lynch.

At first you might think 35,000 is a lot for a bank that employs a couple hundred thousand people.  That is certainly the impression most media outlets will tell you to have.  But you need to look deeper at what has happened to the bank over the last year.  Their purchase of Countrywide has made Bank of America the largest mortgage company in the country.  Since both companies do the same thing, there are thousands of redundant jobs within the organization.  Then there is Merrill Lynch.  This purchase will also make Bank of America the largest broker in the country.  Bank of America already had a brokerage and investment bank.  Again there are thousands of redundancies.  Between the two mergers, I expected at least 20,000 layoffs from them alone.

That leaves about 15,000 that I might not have expected.  Not really though.  Citi, JP Morgan, and every other bank has announced layoffs of thousands as a result of the bad market.  I would expect even an un-merged Bank of America to lay off 10,000-15,000 people just to keep up with the Jones’s.

So I really find nothing shocking about the announcement of 35,000 layoffs.  But not being shocked about layoffs isn’t grounds for calling BS.

No it isn’t.  But keeping up with the Jones’s is.  Everyone is announcing layoffs.  Announcing, not doing.  Bank of America isn’t sure where all the layoffs will come from, and moreover, they are planning these layoffs over a three year period.  Three years?  Do you really think companies think that far ahead?  Especially in the middle of a recession and growing to the largest bank in the country?  Not a chance.  They are only able to think a few weeks in advance on a corporate level.

Everyone was expecting layoffs to come in some form or another, Bank of America simply gave investors what they wanted.  I don’t think for one minute they plan to lay off 35,000 people when they don’t yet know where they will come from.  This announcement also implies they won’t hire people or move folks to other parts of the bank.  Bank of America will re-train/re-hire employees and hire new ones to meet needs.  They’ll also outsource many tasks to other companies.  Those companies will have to hire more people to pick up the workload, even Bank of America knows the outsourcing firms will hire laid off employees from the bank because they are the best fit.  My bank once outsourced its HR, and that company hired away our bank’s HR team.  Now we’re in-sourcing the HR, and hiring back those same people.  Since you don’t know what bank I work for, it could in fact be Bank of America itself.

So no I’m not calling BS on Bank of America, I’m calling it on all the people that think there will be tellers and MBAs living on the streets of New-York, San-Francisco, and Charlotte.  Yes people will get laid off because of redundancies, but it won’t be 35,000.  In three years I would be surprised to see the net reduction in Bank of America employees to even decrease by 10,000.

Don’t think announcements like this are all that huge.  Whenever the media treats something as important, ask yourself for a moment if it really is, or is it something the producers expect to get good ratings when they sensationalize the news.

Read an article that doesn’t force you to be shocked

By The Weakonomist

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categories: banking, economics